SaaS BI Tools: Better Decision Making for the Rest of Us

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1 I D C T E C H N O L O G Y S P O T L I G H T SaaS BI Tools: Better Decision Making for the Rest of Us May 2010 Adapted from Worldwide Business Analytics Software as a Service Forecast by Brian McDonough, Robert P. Mahowald, and Dan Vesset, IDC # Sponsored by SAP Simple business decisions, each of which impacts a company's performance and efficiency, are made every day, at every level of an organization, by workers in every department. But conventional business intelligence (BI) tools are often not available to most decision makers and are typically designed for use only by trained business analysts. Software as a service (SaaS) based BI tools are designed to help the millions of people in non-it "lines of business" (LOBs) who struggle every day with the task of mining Microsoft Excel spreadsheets and other unstructured data sources when performing everyday tasks such as making sales forecasts, planning for resource utilization, or servicing customer accounts. Especially in this time of limited budgets and uncertain futures, inexpensive, easy-to-deploy SaaS BI can help companies put easy-to-use data mining and reporting tools for smart decision making into the hands of more employees and uncover the real "geniuses" of decision making hidden in every department. This Technology Spotlight focuses on the following contentions: SaaS-based analytics can help companies be more resourceful in volatile times and provide a way to align the goals of the business unit and IT. SaaS-based BI tools can allow businesses to optimize how they access and apply business intelligence to help them make good decisions. The core activities of BI (retrieving, aggregating, and presenting data) can be done efficiently using SaaS solutions. New SaaS-based BI solutions offer a way to extend existing BI investments and can work in concert with on-premises solutions. Reading this paper should result in a better understanding of how SaaS-based BI in effect democratizes information access and analysis by putting easy-to-use yet sophisticated tools in the hands of each department's "geniuses." Definitions Three elements require some definition for the purposes of our discussion: "Conventional software" refers to applications with a traditional perpetual license, deployed onsite at a user firm (on premises). "Business analytics software" is part of a market that is divided into several segments and subsegments, including business intelligence; financial performance and strategy management; customer relationship management (CRM) analytics; workforce analytics; supply chain analytics; and advanced analytics, including data mining and statistics. The intent of these tools is to aggregate data from various sources (typically "production" databases), mine data for patterns and trends, and provide reports that are typically either diagnostic (of an ongoing event or series of events that a business will want to be aware of, such as a seasonal spike in sales of a certain item) or prescriptive (building "what if" scenarios for planning, based on data on past trends). IDC 946

2 "Software as a service" is a model for software licensing and delivery where applications built specifically for network delivery are hosted by providers and accessed by users over the Internet. The price for SaaS applications is typically an "all-in" fee that rolls up the application, software maintenance, and related support costs (infrastructure and expenses associated with running, servicing, and provisioning the application) into a monthly per-user subscription fee. Current Situation and Benefits of SaaS Business Intelligence Tools In October 2009, IDC surveyed more than 500 businesses to explore the impact of the financial crisis on short-term planning (general spending plans and specific IT investment). In general, the data supports a picture of a broad slowdown across IT sectors, with businesses increasingly bearish about their short-term ability to invest, whether for stability, growth, or cost savings down the road. But there is a silver lining: The data also clearly supports the notion that this climate will accelerate the growth prospects for the SaaS model and in general for services that provide a near-term business benefit, either a business process improvement or a forecastable (hard) cost savings. In general, SaaS services have benefited from the perception that they are tactical pro tem fixes that allow for relatively easy expansion during hard times. As a result, across most application segments, survey respondents signaled that they were interested in SaaS delivery and were actively building projects around SaaS services. During the same period, SaaS vendors reported a general increase in demand among existing customers. Demand for SaaS-Delivered Applications Indeed, in the same survey, business respondents with a high degree of understanding about the value of SaaS-delivered applications gave a clear indication that they planned to shift some IT workloads to SaaS delivery (see Figure 1). Figure 1 Level of Business Commitment to SaaS Applications Q. What is your organization's general strategy when considering SaaS implementations? Fully committed to SaaS (75 100% SaaS in next 4 5 years) 22.2 Fairly committed to SaaS (50% SaaS in next 4 5 years) Cautiously adopting SaaS (25% SaaS in next 4 5 years) Late adopter or nonadopter of SaaS solutions at this time SaaS is definitely not part of our application strategy at this time n = 522 Note: The survey targeted respondents from firms with at least 500 employees. Source: IDC's SaaS and Cloud Services Survey, October IDC

3 This survey, which targeted respondents from firms with at least 500 employees, showed that nearly 22% of U.S. firms were "fully committed" to SaaS and planned to build businesses that were between 75% and 100% SaaS-based businesses during the next four years. About 22% of these firms saw themselves as late adopters or nonadopters, down from 24.6% in the 2008 survey. When respondents were asked about net-new SaaS projects, 76% said they would launch one to two new projects in the coming year, and 16% indicated that they planned to launch three to four new projects in the next year. When respondents were asked about the importance of SaaS to their businesses, the most common responses were: Reduced total cost of ownership (no hardware/software to set up, very modest use of IT resources) Faster "time to value" (that is, a shorter period between contract signing and putting the application to use) Better performance and availability All three factors have been cited in survey after survey as core reasons why SaaS-delivered services provide immediate and impactful benefits. Growth of Data Analysis Tools The past five years have seen an explosion in the growth of BI tools used to analyze data sets, identify trends and correlated data events, and support good business decisions. But, in some cases, conventional BI solutions can be overly IT centric and relatively expensive, and many are underutilized. They are typically licensed and geared for use by dedicated analysts who serve many business units across complex, multinational, and multibrand organizations, and because of their expense and their ties to legacy data systems, they are centered around IT and not around business functions, such as sales, HR, marketing, and fulfillment. These LOBs are not only the providers of most of the production data that is being analyzed by BI tools but also the primary users of the reports. Therefore, for several reasons, while BI solutions undoubtedly provide tremendous value in business operations and planning, conventionally deployed solutions sometimes have inefficient architecture, high cost, inaccessibility, and complexity. Sometimes the problem is simply that the right tools do not get into the hands of the LOB users whose work relies on the analysis and reporting of BI. But rightsized BI solutions, delivered via SaaS, are easy to use and easy to integrate with solutions that are already serving these departmental users. These BI tools and the superset of business analytics products can then be focused on new streams of data by nonanalysts who have business domain specialties (such as sales executives) and who can look for hidden trends to support a decision, correct a forecast, or improve the performance of a product line. Benefits of SaaS BI BI offerings delivered via the cloud provide tremendous additional benefits of scale and efficiency, lower cost, and better consumption of cloud and local data sources, and they are changing the way businesses license, deploy, and utilize BI to support decisions at their companies. Some benefits of SaaS BI are as follows: Access by more employees to more data. Key beneficiaries of the trend toward SaaS BI have been the millions of people in non-it lines of business who struggle every day with the task of mining Excel spreadsheets and other unstructured data sources when performing everyday tasks such as making sales forecasts, planning for resource utilization, or servicing customer accounts. Users of LOB applications produce the production data that drives BI requirements, and the 2010 IDC 3

4 powerful BI reporting and analysis capabilities are especially impactful in the hands of the users who created the data, resulting in greater adoption and utilization. Every business can be more efficient by putting better reporting and analysis tools into the hands of the LOB and departmental employees who are the subject matter experts in their domains. SaaS BI can make their jobs easier by providing browser-based access to sophisticated but easy-to-use data mining and reporting tools and uncovering the "geniuses" of decision making hidden in every department. Business optimization for hard times. SaaS-based analytics can help companies be more resourceful in volatile times by helping them identify cost savings, efficiencies, and opportunities for process improvement they may have otherwise "missed in the data." Faster "time to value" for a quicker return on investment. Implementations of SaaS BI solutions can be far faster and less expensive than implementations of conventional solutions. Consider that building a traditional BI solution with a data warehouse implementation, data normalization, and data marts for data staging by query systems typically requires between 6 and18 months, sometimes longer. By contrast, SaaS BI deployments typically require 2 to 4 months, and SaaS vendors cannot book revenue until the implementation is complete a situation in which both buyer and seller are equally incented to decrease what some vendors call "time to value." Broad reach across the firewall. Further, because SaaS applications are deployed outside the firewall, users can easily share data, integrate from other data sources, and combine data from corporate databases in different parts of the world, from other internal business units, and also from suppliers and partners in any company's extended value chain. This is especially important for any firm with multiple sites in different physical locations. Streamlined architecture, with zero infrastructure. Unlike on-premises BI systems, SaaSbased BI is hosted by a vendor. Users access the various modules (for example, analysis, reporting) securely via any Web browser. From a systems architecture standpoint, this method is optimal because it does not impose an ongoing computing burden on back-office production systems, and because the application is hosted by the SaaS provider, users do not need to maintain an onsite data warehouse. Users conduct their secure sessions via a Web browser, so there is no client software to install, and users are always assured of running the most recent, optimized version of the application code because SaaS applications are not "rolled out" like conventional applications; they are simply upgraded and optimized on an ongoing basis. Lower implementation costs. A conventional on-premises BI deployment also often requires a long-term professional services component to help build a physical data warehouse, normalize production data from various sources, build frequently used reports, and perform other tasks. But IDC has found that when a SaaS application is being configured for first use, even for complex BI systems that are mapped to on-premises productions systems (such as Oracle or SQL databases for marketing, sales, finance, and so forth), third-party integration and professional services firms are used in only about 10% of these engagements, significantly lowering the cost. Lower ongoing costs. SaaS BI solution vendors charge a "subscription" fee, which provides an "all-in" cost for the right to use the application service, maintenance (upgrade path), and support. This subscription is typically based on the number of users who will interact with the system (per seat), in addition to a support plan. Most SaaS vendors bundle core support (connectivity, basic user-level support) into the basic subscription and offer one or two tiers of support above the basic level, with more stringent service levels, 24 x 7 support, training, and so forth. In general, for most organizations, the cost to deploy a SaaS BI solution based on subscription licensing will be far lower than the cost of buying a conventional on-premises solution IDC

5 Ability to tap operating expense (opex) budgets versus capital expense (capex) budgets. Because SaaS solutions are licenses as subscriptions, their license cost is a monthly, predictable expense and does not require a one-time up-front payment for licenses as conventional software. Further, the ongoing support costs to run associated hardware, management, and integration tools and middleware and hire and train staff members to support on-premises applications are substantial, and nonmaintenance support costs are typically booked as capex. Because these budgets will be flat in , SaaS solutions give users a chance to get access to BI and analytics tools much faster, using opex funds that might reside in their LOB budgets. Better alignment of business goals. Business units consuming IT resources sometimes feel discordance between the technology they know they need to have to produce good business outcomes and the tools their IT staff has the skills and bandwidth to deploy. But IT is typically a cost center, and its priorities don't always align with LOB requirements. SaaS-delivered BI helps business units get business done and helps align the goals of the business unit with its technology tools. Trends in the Market for SaaS BI The overall increase in LOB and corporate executive influence over buying decisions will drive more BI purchases, and business decision makers are showing growing awareness about the potential benefits of BI technology. This trend signals the beginning of a broader shift in decisionmaking power for BI technology purchases from IT centered to business centered. IDC expects this trend to accelerate. According to the forecast published in Worldwide Business Analytics Software as a Service Forecast (IDC #221320), the business analytics SaaS market is expected to expand as a segment of the overall market for business analytics. It will contribute new revenue as well as replace some traditional purchases, resulting in a slight revenue expansion of the total market in the next five years. Significant numbers of users will access analytics functionality through a SaaS model during this time period, which will result in compelling case studies that further educate prospects and drive interest in business analytics SaaS. SaaS applications in core business areas such as HR, CRM, supply chain, and marketing frequently have some organic data analysis and reporting capability, but analytic applications as part of BI typically provide deeper statistical analysis and a more comprehensive set of reporting formats, and applications such as the SAP BusinessObjects BI OnDemand solution are a natural complement to the core SaaS applications, as opposed to being a generic and often not fully functional part of a larger solution. For example, SaaS HR systems are ideal for maintaining employee pay records, managing staffing and recruiting, and monitoring employee travel and expense, but native BI tools are best suited to analyzing the vast pool of information derived from these activities, identifying trends in the data, and understanding the real messages behind the numbers. IDC expects customers to rely on a mix of both core and native BI applications to produce the best business outcomes. Collaborative, embeddable, and easy-to-use interfaces will appeal to more buyers of business analytics SaaS. The ability to document and share analysis processes and easily present findings without the need for reformatting will be a necessity. The ability to deliver highly targeted components of either information or analytic functionality through a portal or composite application must be addressed. Programming interfaces must be replaced with wizard-driven customization interfaces and more appealing visuals applied to data. The language and terminology of business intelligence and data warehousing preferred by the IT industry must be adapted for the business analyst audience and must be presented in the context of business decision making IDC 5

6 Products in the BI market segment and the analytics tools segment are predicted to be strong sellers in through 2010, but while the smaller advanced analytics segment has greater potential, one factor limiting the market has been the lack of professional analytical and statistical skills normally required to use conventional BI applications. Easy-to-use applications such as SAP BusinessObjects BI OnDemand automate some of the statistical analysis required to get the full benefit of data analysis and put it in the hands of a group of decision makers with more "generalist" analytical skills. Analytic and Reporting Tools from SAP SAP BusinessObjects BI OnDemand enables LOB users without prior BI experience to access data in spreadsheets or in on-demand or on-premises data sources; explore data; combine data in a few clicks; create visualizations, charts, reports, and dashboards; and share or distribute data quickly and securely on the Web among employees, customers, or partners. This kind of user-level capability to create what-if scenarios and model real-time reports not ones queued up and pulled only from relational databases run by the IT department has simply not been available before. The applications are run online, so there is no need to purchase software, hardware, and maintenance it's all included in a monthly user fee. SAP BusinessObjects BI OnDemand also provides advanced reporting features including ad hoc reporting and analysis for maximizing the value of data. SAP BusinessObjects BI OnDemand allows companies to maximize the value of their data, closing the loop between business strategy and execution, no matter the size of the company. Challenges The recession has forced organizations to delay spending on many goods and services, and organizations are delaying spending on new licenses for BI tools at a greater rate than previously expected. It is now expected that uncertainty and cost control policies will extend through Notwithstanding the powerful economic benefit and other advantages to sourcing software as a service, the amount of worldwide software spending dedicated to this mode of delivery is still less than 4% of all software spending. Buyers will need to feel they are contracting with reputable firms that can survive tough financial times, deliver service-level agreements at least equal to those they could guarantee with on-premises IT resources, and continually refresh software to provide the latest functionality, or users will not adopt SaaS as quickly as predicted. Conclusion IDC believes that SaaS delivery of BI applications will continue to be an important factor in data analysis and successful decision making in the LOBs of companies. To the extent to which SaaSbased BI and reporting products such as SAP BusinessObjects BI OnDemand can continue to provide the business value and benefits customers are coming to expect from SaaS-based BI, firms such as SAP will thrive. Conventional BI systems are designed to be used by business analysts who run data analysis on behalf of decision makers. But putting these same tools in the hands of LOB users democratizes the information and gives them the power to make impactful business decisions at all levels of the organization. SaaS makes this possible by providing a low-cost way to give Web-based access to significantly more users, using a streamlined architecture. The result is better alignment of business goals between lines of business and IT organizations, better decision-making power in the hands of users, and the discovery that there can be geniuses in every branch, in every department, in every company, just waiting for their chance to "run the numbers" with SaaS-based BI tools IDC

7 A B O U T T H I S P U B L I C A T I O N This publication was produced by IDC Go-to-Market Services. The opinion, analysis, and research results presented herein are drawn from more detailed research and analysis independently conducted and published by IDC, unless specific vendor sponsorship is noted. IDC Go-to-Market Services makes IDC content available in a wide range of formats for distribution by various companies. A license to distribute IDC content does not imply endorsement of or opinion about the licensee. C O P Y R I G H T A N D R E S T R I C T I O N S Any IDC information or reference to IDC that is to be used in advertising, press releases, or promotional materials requires prior written approval from IDC. For permission requests, contact the GMS information line at or Translation and/or localization of this document requires an additional license from IDC. For more information on IDC, visit For more information on IDC GMS, visit Global Headquarters: 5 Speen Street Framingham, MA USA P F IDC 7

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